DC City Council Pushes for Higher Taxes on Consumers

Despite the fact that economists across the political spectrum concede that economic expansion is a more advantageous approach to raising revenue than raising tax rates, some members of the DC City Council are pushing forward with a job-killing tax hike even though Mayor Gray has provided a sensible alternative that would loosen restrictions pertaining to when businesses can stay open and stores can sell alcohol. Instead, Councilman Jim Graham wants to put the screws to the District’s small businesses by hiking the city’s liquor tax. The results of such a hike would be disastrous for employers, consumers, and jobseekers alike.

Don’t just take ATR’s word for it. In today’s Washington Times, Michelle Minton of the Competitive Enterprise Institute highlighted the problems that a liquor tax increase would pose for low income workers just trying to make ends meet:

“The tax actually will be assessed on wholesalers in one large sum. The prices that wholesalers charge bars, stores and restaurants subsequently will jump. This initial increase in expenses will hurt the smallest bars and restaurants, which will try to recoup the losses by increasing the costs of their food and drinks.

This means two things: First, people who aren’t even drinking alcohol likely will end up paying for the increase. Second, wait staff and bartenders likely will see their tips shrink. Most customers calculate tips by rounding up - the “keep the change” method. If the cost of a drink increases by 6 cents, customers aren’t likely to alter their tipping math. Thus, the tax is coming almost directly out of the tips on which many service workers depend.”

Councilman Graham cites a need to reduce alcohol consumption as a reason for his tax hike. Graham doesn’t seem to understand that there is a contradiction in his move to make the District’s budget more reliant on alcohol tax revenue, while also claiming he intends to cut down on alcohol consumption. The same contradictory claims were made when Washington, DC hiked its cigarette tax in 2009. In that instance, revenue not only fell short of projections, tobacco tax revenues came in below pre-hike levels. This was in large part the result of consumers deciding to purchase cigarettes outside the city – most likely in Virginia, where this onerous lifestyle tax is considerably lower.

ATR is encouraging DC residents to contact Councilman Graham and let him know that a tax hike on liquor is the wrong medicine for what ails the District’s budget: overspending. District taxpayers can contact Councilman Graham at (202) 724-8181 or by email at jim@grahamwone.com. Additionally, Graham can be tweeted at @JimGrahamWard1.